G.R. No. 48533; January 30, 1943
ANAK-PAWIS SANTA ROSA, plaintiff-appellant, vs. MATILDE DE GUZMAN, ET AL., defendants-appellees.

FACTS

The plaintiff-appellant, Anak-Pawis Santa Rosa, a corporation, filed an action for the foreclosure of a mortgage executed by the deceased Vicente de Guzman to secure two promissory notes (one for P850 and another for P300) against his legal heirs. The mortgage was executed on July 25, 1927, on a specific lot. After the debtor’s death on June 25, 1928, the creditor instituted intestate estate proceedings. The creditor presented its claim based on the promissory notes before the committee on claims and appraisals appointed by the court. On July 14, 1938, the committee reported that the claim had been disallowed. The creditor’s appeal to the Court of First Instance from the committee’s action was dismissed for failure to file a complaint reproducing its claim as required by procedural law. A motion for reconsideration was denied on December 14, 1938. The project of partition in the intestate proceedings was approved, and the proceedings were ordered closed on February 15, 1939. The trial court held that by presenting its claim before the committee on claims, the plaintiff forfeited its right to bring a separate foreclosure action, as a creditor cannot pursue both remedies under the rules.

ISSUE

Whether the plaintiff-appellant, by presenting its claim before the committee on claims in the intestate proceedings, forfeited its right to bring an independent action for the foreclosure of the mortgage.

RULING

Yes. The Supreme Court affirmed the trial court’s decision. Under Rule 87, Section 7 of the Rules of Court, a creditor holding a claim secured by a mortgage has three mutually exclusive options: (1) abandon the security and prosecute the claim to share in the general distribution of the estate’s assets; (2) foreclose the mortgage by ordinary action in court (with the executor or administrator as a party defendant) and claim any deficiency judgment; or (3) rely solely on the security and foreclose it within the statute of limitations, thereby forfeiting any share in the other assets of the estate. By electing to present its claim before the committee on claims, the plaintiff irrevocably chose the first option—to share in the general distribution—and thereby forfeited the right to foreclose the mortgage in a separate action. The Court noted that the committee on claims lacks the power to order a foreclosure, which can only be done in an ordinary court action. Therefore, the plaintiff’s prayer in its claim for the sale of the mortgaged property was improper and did not alter its election of remedy. The judgment dismissing the foreclosure action was affirmed.